SECURITIES AND EXCHANGE COMMISSION

                             Washington,WASHINGTON, D.C. 20549

                                    FORM 10-Q

             |X|[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended JuneSeptember 30, 1999

                                       OR

            |_|[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

   For the transition period from ____________________ to ____________________

                         Commission File Number 0-14656

                              REPLIGEN CORPORATION
             (exact name of registrant as specified in its charter)

               Delaware                                      04-2729386
    (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                         Identification No.)


             117 Fourth Avenue
         Needham, Massachusetts                                 02494
  (Address of principal executive offices)                    (Zip Code)

       Registrant's telephone number, including area code: (781) 449-9560

        -----------------------------------------------------------------
      (Former name, former address and former fiscal year, if changed since
                                 last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  |X|x  No   |_|.
                                       ___   ___

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of JulyOctober 31, 1999.

   Common Stock, par valueCOMMON STOCK, PAR VALUE $.01 per share                 21,868,085PER SHARE                    22,320,310
   --------------------------------------                  ----------------
                Class                                      Number of Shares






                              2
REPLIGEN CORPORATION

                                      INDEX


PAGE ---- PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets as of JuneSeptember 30, 1999 (Unaudited) and March 31, 1999 (Audited) 4 Condensed Consolidated3 Statements of Operations (Unaudited) for the Three and Six Months Ended JuneSeptember 30, 1999 and 1998 5 Condensed Consolidated4 Statement of Cash Flows (Unaudited) for the ThreeSix Months Ended JuneSeptember 30, 1999 and 1998 65 Notes to Condensed Consolidated Financial Statements (Unaudited) 76 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 109 PART II. OTHER INFORMATION Item 1. Legal Proceedings 1412 Item 2. Changes in Securities 1413 Item 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to a Vote of Security Holders None13 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 1514 Signature 1715 Exhibit Index 1816 Exhibits 1917
32 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS REPLIGEN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JuneASSETS SEPTEMBER 30, 1999 MarchMARCH 31, 1999 ------------- ------------- ASSETS (Unaudited) (Audited)------------------ -------------- Current assets: Cash and cash equivalents $ 11,817,47210,912,517 $ 3,250,751 Accounts receivable 404,370487,522 429,720 Inventories 581,762494,893 630,329 Prepaid expenses and other current assets 267,704310,451 181,617 ------------- ------------------------- ------------ Total current assets 13,071,30812,205,383 4,492,417 Property and equipment, at cost: Equipment 969,4711,089,331 944,644 Furniture and fixtures 139,385155,890 101,376 Leasehold improvements 467,368469,088 460,319 ------------- ------------- 1,576,224------------ ------------ 1,714,309 1,506,339 Less: accumulated depreciation and amortization 936,0531,019,067 862,934 ------------- ------------- 640,171------------ ------------ 695,242 643,405 Other assets, net 81,411 88,472 ------------- ------------------------- ------------ $ 13,792,89012,982,036 $ 5,224,294 ============= =============------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 352,800209,987 $ 268,708 Accrued expenses 338,244308,370 313,926 Unearned income 27,384-- 49,969 ------------- ------------------------- ------------ Total current liabilities 718,428518,357 632,603 Commitments and contingencies -- -- Stockholders' equity: Preferred stock, $.01 par value -- authorized ----authorized - 5,000,000 shares -- outstanding--outstanding - none -- -- Common stock, $.01 par value -- authorized -- 30,000,000--authorized - 40,000,000 shares -- outstanding--outstanding - 21,868,08521,872,085 shares at JuneSeptember 30, 1999 and 18,264,285 shares at March 31, 1999 218,680218,720 182,642 Additional paid-in capital 140,141,927140,335,872 131,272,607 Accumulated deficit (127,286,145)(128,090,913) (126,863,558) ------------- ------------------------- ------------ Total stockholders' equity 13,074,46212,463,679 4,591,691 ------------- ------------------------- ------------ $ 13,792,89012,982,036 $ 5,224,294 ============= =============------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. 43 REPLIGEN CORPORATION CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF OPERATIONS (Unaudited)
Three Months Ended ------------------ June 30,1999 JuneTHREE MONTHS ENDED SEPTEMBER 30, SIX MONTHS ENDED SEPTEMBER 30, 1999 1998 ------------ ------------1999 1998 Revenues: Research and development $ 378,502232,344 $ 268,406470,032 $ 610,847 $ 738,438 Product 232,470 229,138578,996 197,010 811,466 426,149 Investment income 46,538 61,691156,247 57,491 202,784 119,182 Other 30,658 33,18814,438 37,648 45,095 70,836 ------------ ------------ 688,168 592,423 ------------ ------------ 982,025 762,181 1,670,192 1,354,604 Costs and expenses: Research and development 488,203 466,069733,045 464,955 1,221,248 931,025 Selling, general and administrative 426,169 356,932767,214 354,311 1,193,383 711,243 Cost of products sold 196,383 112,282286,534 141,991 482,917 254,273 ------------ ------------ 1,110,755 935,283------------ ------------ 1,786,793 961,258 2,897,548 1,896,541 ------------ ------------ ------------ ------------ Net loss $ (422,587)(804,768) $ (342,860) ============ ============(199,077) $ (1,227,356) $ (541,937) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Basic and diluted net loss per share $ (0.02)(0.04) $ (0.02) ============ ============(0.01) $ (0.06) $ (0.03) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Basic and diluted weighted average 21,867,601 18,001,785 20,324,426 18,001,785 common shares outstanding 18,744,863 18,001,785 ============ ============------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. 54 REPLIGEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ThreeSix Months Ended JuneSeptember 30, -------------------------------------------------------------- 1999 1998 ------------ ------------------ ----- Cash flows from operating activities:activities Net loss $ (422,587)(1,227,356) $ (342,860)(541,937) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 73,119 64,213156,134 131,586 Non cash charge for warrant issuance 188,265 -- Changes in assets and liabilities - Accounts receivable 25,349 (193,724)(57,802) (247,862) Inventories 48,567 (37,111)135,436 (56,677) Prepaid expenses and other current assets (86,087) 44,512(128,834) 79,115 Accounts payable 84,094 (1,208)(58,721) 11,202 Accrued expenses 24,318 116,491(5,556) 111,186 Unearned income (22,585)(49,969) (33,332) ------------ ------------------------- Net cash used in operating activities (275,812) (383,019) ------------ ------------(1,048,403) (546,719) Cash flows from investing activities:activities Purchases of property and equipment, at cost (69,886) (55,953)(207,970) (78,951) Changes in other assets 7,061 -- ------------ ------------------------- Net cash used in investing activities (62,825) (55,953) ------------ ------------(200,909) (78,951) Cash flows from financing activities: Net proceeds from the issuance of common stock and warrants, net of issuance costs 8,905,3588,911,078 -- ------------ ------------------------- Net cash provided by financing activities 8,905,3588,911,078 -- ------------ ------------------------- Net increase (decrease) in cash and cash equivalents 8,566,721 (438,971)7,661,766 (625,670) Cash and cash equivalents, beginning of period 3,250,751 4,725,544 ------------ ------------------------- Cash and cash equivalents, end of period $ 11,817,47210,912,517 $ 4,286,573 ============ ============4,099,874 ------------ ------------- ------------ -------------
See accompanying notes to condensed consolidated financial statements. 65 REPLIGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(UNAUDITED) 1. Basis of PresentationBASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by Repligen Corporation (the "Company" or "Repligen"), pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and footnote disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 10-K for the year ended March 31, 1999. In the opinion of management, the accompanying unaudited financial statements include all adjustments, consisting of only normal, recurring adjustments, necessary to present fairly, the consolidated financial position, results of operations and cash flows.flows of the Company. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Net Loss Per ShareNET LOSS PER SHARE The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share,EARNINGS PER SHARE, effective December 15, 1998. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. The Company has applied the provisions of SFAS No. 128, retroactively to all periods presented. Basic and diluted net loss per share represents net loss divided by the weighted average number of common shares outstanding during the period. The dilutive effect of the potential common shares consisting of outstanding stock options and warrants is determined using the treasury stock method in accordance with SFAS No. 128. Diluted weighted average shares outstanding at JuneSeptember 30, 1999 and 1998 excluded the potential common shares from warrants and stock options because to do so would be antidilutive for the periods presented. At JuneSeptember 30, 1999, there are 1,335,4911,332,791 options outstanding with a weighted average exercise price of $1.82$1.94 and 3,207,0503,307,050 warrants outstanding with a weighted average exercise price of $3.19.$3.18. At September 30, 1998, there are 1,042,000 options outstanding with a weighted average exercise price of $1.34 and 2,832,000 warrants outstanding with a weighted average exercise price of $3.97. 3. Cash and Cash Equivalents 7 CASH AND CASH EQUIVALENTS The Company considers highly liquid investments purchased with original maturities at the date of acquisition of three months or less to be cash equivalents. Cash equivalents consist of the following at JuneSeptember 30, 1999 and March 31, 1999: Three Months Ended June 30,1999 March 31, 1999 ------------ -------------- U.S. Government and Agency securities ...... $ 5,585,426 $ 1,197,624 Commercial paper ........................... 5,185,168 1,136,119 Money markets .............................. 969,188 802,755 Cash ....................................... 77,690 114,253 ----------- ----------- Total cash and cash equivalents ......... $11,817,472 $ 3,250,751 =========== ===========6
Three Months Ended September 30,1999 March 31, 1999 (Unaudited) U.S. Government and Agency securities $ 4,989,877 $ 1,197,624 Commercial paper 3,963,497 1,136,119 Money markets 1,797,830 802,755 Cash 161,313 114,253 ---------- ---------- Total cash and cash equivalents $10,912,517 $ 3,250,751 ---------- ---------- ---------- ----------
4. InventoriesINVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: June 30, 1999 March 31,1999 (Unaudited) Raw materials and work-in-process $420,726 $412,480 Finished goods 161,036 217,849 -------- -------- Total $581,762 $630,329 ======== ========
September 30, 1999 March 31,1999 (Unaudited) Raw materials and work-in-process $371,305 $412,480 Finished goods 123,587 217,849 ------- ------- Total $494,892 $630,329 ------- ------- ------- -------
Work in process and finished goods inventories consist of material, labor, outside processing costs and manufacturing overhead. 5. Comprehensive IncomeCOMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted SFAS No. 130 Reporting Comprehensive Income,REPORTING COMPREHENSIVE INCOME, effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The comprehensive net loss is the same as net loss for all periods presented. 6. Disclosures about Segments of an Enterprise and Significant CustomersDISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT CUSTOMERS The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and RelatedDISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED Information, in the fiscal year ended March 31, 1999. SFAS No. 131 establishes 8 standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions now to allocate resources and assess performance. To date, the Company has viewed its operations and manages its business as principally one operating segment. As a result, the financial information disclosed herein, represents all of the material financial information related to the Company's principal operating segment. 7 The following table represents the Company's revenue by country: Three Months Ended June 30, ----------------------------------------- 1999 1998 1997
Three Months Ended Six Months Ended September 30, September 30, 1999 1998 1999 1998 ---- ---- ---- ---- US 61% 85% 59% 73% Europe 38% 10% 39% 22% Other 1% 5% 2% 5% ---- ---- --- ---- ---- ---- United States 56% 57% 85% Sweden 25% 4% 1% United Kingdom 14% 12% 8% Other 5% 27% 6% Total 100% 100% 100% 100%
During the three months ended JuneSeptember 30,1999, there were twothree significant customers which accounted for approximately 25%12%, 10% and 14%11% of the Company's revenues or $172,000$118,000 $100,000 and $96,000.$105,300, respectively. The related accounts receivable for these twothree customers at JuneSeptember 30, 1999 was fully paid$62,000, $0 and $96,000,$47,000, respectively. 7. Sale of SecuritiesSALE OF SECURITIES Pursuant to two stock purchase agreements dated as of April 30, 1999 and May 14, 1999, respectively, by and among Repligen and the respective parties thereto, Repligen issued to the parties theretoin a private placement an aggregate of 3,600,000 shares of Common Stock of Repligen for an aggregate purchase price of approximately $9 million. Based on the representations of the investing parties and a reasonable belief of Repligen that all such parties were "accredited" (as such term is defined in Rule 501 of the Securities Act of 1933) and that the parties were acquiring the shares of Common Stock of Repligen for investment and not with a view to the distribution thereof, Repligen consummated a private placement of the 3,600,000 shares of Common Stock of Repligen pursuant to Regulation D, Rule 506 of the Securities Act of 1933. Repligen closed the private placement transaction on June 23, 1999. There were no underwriters involved in such private placement transaction. Repligen will use the proceeds from the private placement transaction for working capital and other general corporate purposes. Repligen filed a registration statement with the Securities and Exchange Commission on Form S-3 on June 16, 1999 for the resale of the 3,600,000 shares of Common Stock of Repligen sold to the parties in the private placement transaction. The 9 Securities and Exchange Commission declared such resale registration statement effective on June 23, 1999. 8. SUBSEQUENT EVENT In October 1999 the Company licensed commercialization rights to two diagnostic secretin products from ChiRhoClin Inc., a private company. These products have been evaluated in clinical trials for the diagnosis of pancreatic dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May 1999 seeking approval to market synthetic porcine secretin for these applications. ChiRhoClin has also conducted clinical studies for these diagnostic indications with a human form of secretin which it intends to submit to the FDA in 2000. Under terms of the agreement, Repligen paid $1,000,000 upon execution of the agreement and, if the NDAs are approved, the Company will be required to pay future milestones and royalties. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements Statements in this Quarterly Report on Form 10-Q as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf, that are not historical facts constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements. The Company's future operating results are subject to risks and uncertainties and are dependent upon many factors, including, without limitation, the Company's ability to (i) meet its working capital and future liquidity needs, (ii) successfully implement its strategic growth strategies, (iii) understand, anticipate and respond to rapidly changing technologies and market trends, (iv) develop, manufacture and deliver high quality, technologically advanced products on a timely basis to withstand competition from competitors which may have greater financial, information gathering and marketing resources than the Company, (v) obtain and protect licensing and intellectual property rights necessary for the Company's technology and product development on terms favorable to the Company, (vi) recruit and retain highly talented professionals in a competitive job market, (vii) realize future revenues, (viii) maintain a timeline for clinical activity, (ix) obtain successful results of pending or future clinical trials, (x) continue to establish collaborative arrangements with third parties, and (xi) compete against the biotechnology and pharmaceutical industries. Further information on potential factors that could affect the Company's financial results are included in filings made by the Company from time to time with the Securities and Exchange Commission included in the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999 (File No.000-14656). OverviewOVERVIEW Repligen develops new drugs for the treatment of neurological disease,autism, organ transplantation and cancer. To expand our drug development program, onin March 9, 1999, Repligenwe acquired the exclusive rights to patent applications for the use of secretin in the treatment of autism. Autism is a developmental disorder characterized by poor communication and social skills, negative behavior, irregular sleep patterns and diminished ability to learn. Secretin is a hormone produced in the small intestine which regulates the function of the pancreas as part of the process of digestion. A form of secretin derived from pigs is approved by the United States Food and Drug Administration for use in diagnosing problems with pancreatic function. Recent anecdotal reports indicate that secretin may have beneficial effects in treating 10 autism, including improvements in sleep, digestive function, speech and social behavior. Following media reports of the potential benefits of secretin, more than 2,000 autistic children have been treated with the pig-derived hormone. We intend to manufacture a human, synthetic form of secretin and evaluate it in FDA approved clinical trials in order to confirm the benefits of secretin in treating autism and to determine the optimal dosing schedule. Currently there are no drugs approved by the FDA for the treatment of autism. Repligen also is developing a product named "CTLA4-Ig," which has been shown to suppress unwanted immune responses in animal models of organ transplantstransplantation and autoimmune diseases, such as lupus or multiple sclerosis, in which the immune system mistakenly attacks the body. Our product candidate is a derivative of a natural protein whose role is to turn-off an immune response. In animal models of organ transplantation and autoimmune diseases, CTLA4-IgCTLA4- 9 Ig has been shown to block the rejection of a transplanted organ or the effects of the autoimmune disease. Initial clinical testing of CTLA4-Ig has been carried out in patients receiving a bone marrow transplant, which is a potential cure for several diseases of the immune system, including leukemia, myeloma, lymphoma and sickle cell anemia. Despite the clinical success of bone marrow transplants, a significant number of patients experience a severe and potentially life-threatening complication known as Graft Versus Host Disease, in which the newly transplanted immune system attacks the host (i.e., the patient). In December 1998,June 1999, investigators from the Dana-Farber Cancer Institute, a research hospital in Boston, reported in the NEW ENGLAND JOURNAL OF MEDICINE that treatment of bone marrow from a family member who was takingwith CTLA4-Ig substantially reduced Graphprevented Graft Versus Host Disease in twelveeight of eleven transplant patients. Repligen intends to further evaluate CTLA4-Ig in bone marrow transplantstransplantation for leukemia.leukemia in collaboration with the National Cancer Institute. In October 1999 we licensed commercialization rights to two diagnostic secretin products from ChiRhoClin Inc., a private company. These products have been evaluated in clinical trials for the diagnosis of pancreatic dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May 1999 seeking approval to market synthetic porcine secretin for these applications. ChiRhoClin has also conducted clinical studies for these diagnostic indications with a human form of secretin which it intends to submit to the FDA in 2000. Repligen develops, manufactures and markets products for the production of therapeutic antibodies. We currently market a line of products for the purification of antibodies based on a naturally occurring protein, Protein A, which can specifically bind to antibodies. In December 1998, Repligen entered into a ten year relationship to supply recombinant Protein A to Amersham Pharmacia Biotech, a leading supplier to the biopharmaceutical market. Results of Operations RevenuesRESULTS OF OPERATIONS REVENUES Total revenues for the three month period ended JuneSeptember 30, 1999 and 1998 were approximately $688,000$982,000 and $592,000,$762,000, respectively, an increase of approximately $96,000$220,000 or 16%29%. This increase was largely attributable to increased researchproduct sales of recombinant Protein A and development revenue.investment income. Year to date total revenues increased approximately $316,000, or 23%, to $1,670,000 at September 30,1999 from $1,355,000 at September 30,1998. Research and development revenues for the three month period ended JuneSeptember 30, 1999 and 1998 were approximately $379,000$232,000 and $268,000,$470,000, respectively, an increasea decrease of approximately $111,000$238,000 or 41%51%. This increaseThe decrease in quarterly revenue was largely attributable to a licensing payment received during the three months ended JuneSeptember 30, 1999 offset by1998. Year to date revenues decreased revenues associated withapproximately $128,000 or 17% as a result of the discontinuation of research collaborations on itsRepligen's drug discovery programs that generated revenue during the 11 threesix months ended JuneSeptember 30, 1999.1998. Product revenues for the three month period ended JuneSeptember 30, 1999 and 1998 were approximately $232,000$579,000 and $229,000,$197,000, respectively, an increase of $3,000$382,000 or 1%194%. Year to date revenues increased 90% or approximately $385,000 to $811,000 from $426,000 at September 30, 1999 and 1998, respectively. This increase is attributable to increased sales of Protein A products offset by decreased sales of reagent products.during such periods. 10 Investment income for the three month period ended JuneSeptember 30, 1999 and 1998 was approximately $47,000$156,000 and $62,000,$57,000, respectively, a decreasean increase of approximately $15,000$99,000 or 24%173%. This decrease isYear to date revenue increased 71% or approximately $84,000 to $203,000 from $119,000. These increases are largely attributable to higher average funds available for investment and higher interest rates duringarising principally out of the three months ended June 30, 1998. The Company completed itscompletion of a private placement of common stock financingto certain investors of $8,900,000 on June 23, 1999. Other revenues for the three month period ended JuneSeptember 30, 1999 were approximately $31,000,$15,000, a decrease of $2,000$23,000 or 6%61% from the comparable period ended JuneSeptember 30, 1998. Year to date revenue was $45,000 and $71,000 for the six months ended September 30, 1999 and 1998, respectively. This decrease is primarily due to the salesales of unused equipment held by Repligen reported as other income induring fiscal year 1999. ExpensesEXPENSES Total expenses for the three month period ended JuneSeptember 30, 1999 and 1998 increased to approximately $1,111,000$1,787,000 from $935,000,$961,000, an increase of $176,000$826,000 or 18%86%. For the six months ended September 30, 1999 and 1998, expenses were $2,898,000 and $1,897,000, respectively, an increase of $1,001,000 or 35%. Research and development expenses for the three month period ended JuneSeptember 30, 1999 and 1998 were approximately $488,000$733,000 and $466,000,$465,000, respectively, an increase of $22,000$268,000 or 5%58%. This increase reflects increased staffing in researchYear to date expenses were $1,221,000 and development as Repligen expands its investment in$931,000 for the six month period September 30, 1999 and 1998, respectively. These increases reflect costs associated with its drug development programs.programs for secretin and CTLA4-Ig. Selling, general and administrative expenses for the three months ended JuneSeptember 30, 1999 and 1998 were approximately $426,000$767,000 and $357,000,$354,000, respectively, an increase of $69,000$413,000 or 19%117%. For the six month period ended September 30, 1999 and 1998, respectively, selling, general and administrative expenses were $1,193,000 and $711,000, respectively, an increase of $482,000 or 68%. This increase is attributable to increased costs in administrative salaries andnon-recurring expenses associated benefits.with a financial advisory agreement with a shareholder, including a non-cash charge for the issuance of warrants exercisable for shares of Common Stock of Repligen pursuant to an agreement signed during the quarter ended September 30, 1999. Cost of products sold for the three months ended JuneSeptember 30, 1999 and 1998 were approximately $196,000$287,000 and $112,000,$142,000, respectively, an increase of $84,000,$145,000, or 75%102%. CostYear to date costs as of products sold in the three months ended JuneSeptember 30, 1999 and 1998 were 85%$483,000 and 49%, respectively,$254,000, an increase of product revenues.$229,000 or 90%. This increase is largely attributable to costs associated with the startupcommencement of its manufacturing contract for AP Biotech duringBiotech. Cost of products sold in the three month periodmonths ended JuneSeptember 30, 1999. Liquidity1999 and Capital Resources1998 were 50% and 72%, respectively, of product revenues and for the six months ended September 30, 1999 and 1998, 60% and 60%, respectively. LIQUIDITY AND CAPITAL RESOURCES Repligen's total cash and cash equivalents increased to $11,817,000$10,913,000 at JuneSeptember 30, 1999 from $3,251,000 at March 31, 1999. This increase of $8,566,000$7,662,000 reflects $8,900,000 of proceeds resulting from the sale of Common Stock of Repligen to certain investors through a private placement that closed during the three months ended June 30, 1999, offset by a net 12 loss from operations incurred during the threesix month period ended JuneSeptember 30, 1999 of approximately $423,000,$1,227,000, an increase in prepaid expensesaccounts receivable of $86,000$58,000 and capital expenditures of $70,000, offset in part by thean increase in accrued expenses and11 accounts payable of $108,000 and accounts receivable of $49,000.$59,000. Working capital increased to $12,353,000$11,762,000 at JuneSeptember 30, 1999 from $3,860,000 at March 31, 1999. Repligen has entered into agreements with a number of collaborative partners and licensees. Under the terms of these agreements, Repligen may be eligible to receive research support, additional milestones or royalty revenue if these collaborations result in clinical evaluation and commercialization of products developed. Repligen can not be certain of theThe continuation of these collaborations or of receiving any future payments related to these agreements.agreements cannot be guaranteed. While Repligen anticipates that the cost of operations is anticipated towill increase in fiscal 2000 as Repligen expands its investment in proprietary product development, Repligen believes that the private placement financing, yielding an aggregate of $8,900,000 in net proceeds, will provide sufficient funding to satisfy itsRepligen's working capital and capital expenditure requirements for the next twenty-four months. Should Repligen need to secure additional financing to meet its future liquidity requirements, Repligen may not be able to secure such financing, or obtain such financing on favorable terms because of the volatile nature of the biotechnology market place. YearYEAR 2000 Repligen has undertaken an initial review of its information technology computer systems and it believes that the Year 2000 problem does not pose significant operational problems to its information technology systems. The majority of Repligen's software and computer equipment has been purchased within the last five years from third-party vendors who have already provided upgrades intended to bring their products into Year 2000 compliance. Repligen has begun to address the small number of internal systems that are not yet Year 2000 compliant, and expects full compliance by the end of 1999. Repligen currently believes that the costs of addressing these issues should not exceed $50,000 and will not have a material adverse impact on Repligen's financial position. Repligen has recently begun interviewinginterviewed various third parties, including vendors and suppliers of Repligen, to determine their exposure to Year 2000 issues, their anticipated risks and responses to those risks. To date, the third parties that have been contacted have indicated that their hardware or software is or will be Year 2000 compliant in a time frame that meets Repligen's requirements. Even with the vendor compliance however, Repligen intends to continue to assess its exposure to Year 2000 noncompliance on the part of any of its material vendors. There can beRepligen has no assurance thatcontrol, however, of whether the vendor's systems will be Year 2000 compliant in a time frame satisfactory to Repligen. 13 Repligen does not haveis working to establish a contingency plan in the event Year 2000 compliance cannot be achieved in a timely manner. A contingency plan will be developed immediately upon completion of Repligen's Year 2000 compliance assessment. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On July 17, 1998, Repligen filed a complaint against Bristol Meyers Squibb ("BMS") at the United States District Court for the District of Massachusetts in Boston, Massachusetts seeking correction of inventorship of certain United States patents which claim compositions and methods of use for CTLA4 as well as unspecified monetary damages. A correction of inventorship would result in the University of Michigan being designated as a co-assignee on any corrected Bristol-MyersBMS 12 patent. Repligen would then have rights to such technology pursuant to a 1992 License Agreement with the University of Michigan, a 1995 Asset Acquisition Agreement with Genetics Institute, and other related agreements. On July 13, 1999, the court dismissed the complaint without prejudice citing a lack of legal standing of Repligen to bring such a complaint. We believe that the court's finding on standing was in error. The court did not rule on the validity of Repligen's inventorship claim. Repligen continues to believe that the University of Michigan is a rightful co-assignee of the aforesaid Bristol-MyersBMS patents and we intend to continue to pursue the correction of inventorship. There can be no assurances that litigation will conclude in a result beneficial to Repligen, andRepligen's failure to obtain shared ownership rights in the patents may restrict Repligen's ability to commercialize CTLA4-Ig. Item 2. CHANGES IN SECURITIES Pursuant to two stock purchase agreementsa Financial Advisory Agreement dated as of April 30,July 15, 1999 and May 14, 1999, respectively, by and amongbetween Repligen and Paramount Capital, Inc. ("Paramount"), Repligen engaged Paramount as a non-exclusive financial adviser for an initial period of twelve months from the respective parties thereto,date thereof. In exchange and as consideration for Paramount's financial services, Repligen paid to Paramount $100,000 in cash and issued to the parties theretoParamount (and its designees) warrants to purchase an aggregate of 3,600,000100,000 shares of Common Stock of Repligen for an aggregate purchase price(the "Warrants"). Each Warrant is exercisable at $2.75 per share at any time prior to July 15, 2004. Repligen also agreed to pay Paramount additional fees to be agreed upon between the parties upon the consummation of $9 million.certain equity financing transactions as set forth in the Financial Advisory Agreement. Based on thecertain representations of the investing parties andby Paramount, Repligen had a reasonable belief that Paramount (and its designees) were acquiring the Warrants (and the shares issuable upon exercise thereof) for investment and not for distribution and that of Repligen that all such partiesthe ten designees receiving the Warrants, at least five were "accredited" (as such term is defined inunder Rule 501 of the Securities Act of 1933) and that. Pursuant thereto, Repligen issued the parties were acquiring the shares of Common Stock of Repligen for investment and not with a viewWarrants to the distribution thereof, Repligen consummatedsuch designees in a private placement transaction exempt from the registration requirements of the 3,600,000 sharesSecurities Act of Common Stock of Repligen1933 pursuant to Regulation D, Rule 506 of the Securities Act of 1933. Repligen closed the private placement transaction on June 23, 1999. There were no underwriters involvedin valued in such private placement transaction. Pursuant to the Financial Advisory Agreement, Repligen will usegranted Paramount "piggy-back" registration rights with respect to the proceeds fromshares of Common Stock issuable upon exercise of the private placement transactionWarrants, and subject to the terms of the Financial Advisory Agreement, has agreed to register for working capitalresale the shares of Common Stock issuable upon exercise of the Warrants by May, 2000. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Stockholders (the "Annual Meeting") was held on September 16, 1999. At the Annual Meeting, the stockholders of the Company considered and other general corporate purposes. Repligen filedacted upon a registration statement withproposal to: (i) elect five members to the Securities and Exchange Commission on Form S-3 on June 16, 1999Board of Directors (ii) ratify the selection of Arthur Andersen LLP as the independent auditors of the Company for the resalefiscal year ending March 31, 1999 and (iii) amend Repligen's Restated Certificate of Incorporation to increase the 3,600,000number of authorized shares of Common Stock, par value $.01 per share, from 30,000,000 shares to 40,000,000 shares. The Company had 21,868,085 shares of Common Stock of Repligen soldthe Company issued and outstanding and entitled to vote as of the partiesclose of business on July 23, 1999, the record date established by the Board of Directors for the Annual Meeting. At the Annual Meeting, holders of a total of 17,432,216 shares of Common Stock or approximately 79% of all stockholders entitled to vote were present in person or represented by proxy. The following sets forth the private placement transaction. The Securities and Exchange Commission declared such resale registration statement effective on June 23, 1999. 14information regarding the results of the voting at the Annual Meeting: 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits EXHIBIT DESCRIPTION 3.1Proposal 1. Election of Directors:
Directors Shares Voting Shares Voting in Favor Against -------- ------- Robert J. Hennessey* 17,339,046 93,170 Alexander Rich, M.D.* 17,319,986 112,230 Paul Schimmel, Ph.D.* 17,344,971 87,245 Walter C. Herlihy, Ph.D.* 17,343,171 89,045 G. William Miller* 17,344,971 112,230
* Incumbent Proposal 2. Ratification of Selection of Arthur Andersen LLP as independent auditors: Shares voting in favor: 17,376,364 Shares voting against: 28,307 Abstention: 27,545
Proposal 3. Amend the Restated Certificate of Incorporation dated June 30, 1992 and filed July 13, 1992 (filed as Exhibit 4.12 to Repligen Corporation's Annual Report on Form 10-K File No. 0-14656 forincrease the year ended March 31, 1993 and incorporated herein by reference). 3.2 By-laws (filed as Exhibit 3.4number of authorized shares from 30,000,000 shares to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4.1 Stock Purchase Agreement dated as of April 30, 1999, by and among Repligen Corporation and Wellington Management Company, LLP, as Investment Advisor to the investors listed on Schedule I thereto (previously filed as Exhibit 4.1 to Repligen's current report on Form40,000,000 shares: Shares voting in favor: 17,986,570 Shares voting against: 408,026 Abstention: 37,620
Item 6. EXHIBITS AND REPORTS ON FORM 8-K on May 17, 1999 and incorporated herein by reference). 4.2 Stock Purchase Agreement dated as of May 14, 1999, by and among Repligen Corporation and the investors listed on the Schedule I thereto (previously filed as Exhibit 4.2 to Repligen's current report on Form 8-K on May 17, 1999 and incorporated herein by reference). 10.1* Supply Agreement dated as of May 26, 1999 by and between Repligen Corporation and Amersham Pharmacia Biotech AB (with certain confidential information deleted)(a) Exhibits
EXHIBIT DESCRIPTION 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992, as amended (filed herewith) 3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4.1 * Form of Warrant Agreement (filed herewith) 10.1 ** Financial Advisory Agreement with Paramount Capital, Inc. (filed herewith). 27.1 Financial Data Schedule (filed herewith)
* Repligen issued a Common Stock Purchase Warrant to ten designees of Paramount in connection with Paramount's services to Repligen. Each Warrant was identical except for the number of shares of Common Stock issuable upon exercise of such Warrant. ** The AppendixesExhibit A to the SupplyFinancial Advisory Agreement, includedwhich is not attached to the Financial Advisory Agreement, is filed by Repligen as Exhibit 10.1 hereto, are not being filed herewith. The Supply Agreement filed herewith contains a list briefly identifying the contents of all appendixes to such document. The Company undertakes to furnish a copy of any omitted appendix to the Commission upon request (except that Appendix C and D thereto shall 15 remain confidential). Pursuant to Item 601 (b) (2) of Regulation S-K, set forth below is a list of the omitted appendixes. SUPPLY AGREEMENT (EXHIBIT 10.1 HERETO) Appendix A Biotech IPA Products Appendix B Certificate of Analysis Appendix C Price Schedule for First Contract Year Appendix D New Product4.1 hereunder. (b) Reports on Form 8-K 1. Current Report on Form 8-K/AThe Company filed with the Securities and Exchange Commission on June 15, 1999 (amending Current Reportno current reports on Form 8-K filed March 24, 1999) (description of transaction relating to acquisition of all rights to certain patent applications). 2. Current Report on Form 8-K filed withduring the Securities and Exchange Commission on May 17, 1999 (description of private placement transaction relating to sale of common stock ofquarter covered by the Company for an aggregate purchase price of $9 million). 16report. 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REPLIGEN CORPORATION (Registrant) Date: August 13,November 15, 1999 By: /s/ Walter C. Herlihy --------------------------------------------------- Chief Executive Officer and President, Principal Financial and Accounting Officer 1715 Repligen Corporation Exhibit Index EXHIBIT DESCRIPTION 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992 (filed as Exhibit 4.12 to Repligen Corporation's Annual Report on Form 10-K File No. 0-14656 for the year ended March 31, 1993 and incorporated herein by reference). 3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4.1 Stock Purchase Agreement dated as of April 30, 1999, by and among Repligen Corporation and Wellington Management Company, LLP, as Investment Advisor to the investors listed on Schedule I thereto (previously filed as Exhibit 4.1 to Repligen's current report on Form 8-K on May 17, 1999 and incorporated herein by reference). 4.2 Stock Purchase Agreement dated as of May 14, 1999, by and among Repligen Corporation and the investors listed on the Schedule I thereto (previously filed as Exhibit 4.2 to Repligen's current report on Form 8-K on May 17, 1999 and incorporated herein by reference). 10.1 Supply Agreement dated as of May 26, 1999 by and between Repligen Corporation and Amersham Pharmacia Biotech AB (with certain confidential information deleted)
EXHIBIT DESCRIPTION 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992, as amended (filed herewith) 3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4.1 * Form of Warrant Agreement (filed herewith) 10.1 ** Financial Advisory Agreement with Paramount Capital, Inc. (filed herewith). 27.1 Financial Data Schedule (filed herewith) 18
* Repligen issued a Common Stock Purchase Warrant to ten designees of Paramount in connection with Paramount's services to Repligen. Each Warrant was identical except for the number of shares of Common Stock issuable upon exercise of such Warrant. ** The Exhibit A to the Financial Advisory Agreement, which is not attached to the Financial Advisory Agreement, is filed by Repligen as Exhibit 4.1 hereunder. 16